AUD/USD – Steady As Inflation Data Jumps

AUD/USD showed some upward movement on Thursday but was unable to consolidate these gains. Late in the European session, the pair is trading in the mid-0.92 range, unchanged from the close on Wednesday. The Aussie briefly improved after MI Inflation Expectations jumped 4.4%, its sharpest gain in over three years. Over in the US, the Federal Reserve minutes were low key in tone, eliciting little reaction from the markets. On Thursday, there are two key releases on the schedule – Unemployment Claims and Existing Home Sales.

The Federal Reserve minutes were released on Wednesday, and there was no dramatic response from the markets. In the minutes, policymakers discussed an exit strategy from its QE stimulus program, which is set to terminate at the end of 2014. This will likely mean an increase in interest rates, but the minutes didn’t provide a timetable as to when rates might go up, and by how much. Low inflation levels means there is less pressure on the Fed to raise rates next year, but the economic conditions could change in the meantime. The Federal Reserve remains comfortable with its accommodative stance, and will want to see stronger growth and employment numbers before making changes to monetary policy, such as raising rates.

Australian consumers were in a sour mood in April, as Consumer Sentiment plunged 6.8%, its steepest decline since August 2011. Weaker consumer confidence usually translates into less consumer spending, a key engine of economic growth. With the recent Australian budget offering tax increases and spending cuts, the fragile Australian economy is expected to slow down, and this could hurt the Australian dollar.

The RBA minutes were released on Tuesday, and the central bank said that it plans to keep interest rate levels at the current low levels of 2.50% for the foreseeable future, due to projections of weak growth from the economy. With inflation at low levels and the government having just delivered an austerity budget, the RBA said it has no plans to alter its accommodative monetary stance. Unlike recent policy statements, the RBA did not comment on the high value of the Australian dollar. In the past, the RBA has not hesitated to point a finger at the Aussie, saying it has weighed on the economic recovery.

AUD/USD for Thursday, May 22, 2014

AUD/USD May 22 at 12:20 GMT

AUD/USD 0.9234 H: 0.9273 L: 0.9220

AUD/USD Technical

• On the downside, 0.9229 has reverted to a support role. This line is under strong pressure from the AUD/USD.
• 0.9361 is strong resistance.

Further levels in both directions:

• Below: 0.9229, 0.9119, 0.9000, 0.8893 and 0.8757
• Above: 0.9361, 0.9446 and 0.9617 and 0.9757

OANDA’s Open Positions Ratio

AUD/USD ratio is almost unchanged in Thursday trading. This is consistent with the movement from the pair, which has not been able to sustain any momentum on Thursday. The ratio has a strong majority of long positions, indicative of trader bias towards the Australian dollar breaking out of range trading and moving upwards.

AUD/USD continues to trade in the low-0.92 range. The Australian dollar has edged lower in the North American session.

AUD/USD Fundamentals

• 1:02 Australian MI Inflation Expectations. Actual 4.4%.
• 12:30 US Unemployment Claims. Estimate 312K.
• 13:45 US Flash Manufacturing PMI. Estimate 55.6 points.
• 14:00 US Existing Home Sales. Estimate 4.71M.
• 14:00 US CB Leading Index. Estimate 0.4%.
• 14:30 US Natural Gas Storage. Estimate 104B.

*Key releases are highlighted in bold

*All release times are GMT

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